Customer Lifetime Value Calculator - CLV, LTV:CAC, Payback

Customer Details

CLV from a lifespan or churn rate; with gross margin and CAC, the LTV:CAC ratio, CAC payback and the most to spend per customer at 3:1.

Enter Average Purchase Value

Enter Purchase Frequency

Select Mode

Enter Lifespan or Churn

This is lifetime revenue, not profit, and it is not discounted. It does not subtract cost of goods, fulfillment, or support, so a high CLV can still describe a low-margin customer. It is built from averages; your own cohort data shows what customers actually spend over time.

Formulas and sources

Each formula this calculator uses, where it comes from, and what it leaves out. "How it works" shows the same formula with your own numbers.

Customer lifetime value from a lifespan

Simple mode

CLV = APV × F × L
CLV
customer lifetime value: the revenue one customer brings, not discounted
APV
average purchase value
F
purchases per year (weekly × 52, monthly × 12)
L
customer lifespan in years (months ÷ 12)

Source: Based on the CLV definition in Gupta and colleagues (2006), equation 1 [1], simplified: a fixed lifespan, no discount rate and revenue in place of profit. They note that an expected lifetime generally overstates CLV; in one discounted example by Gupta, Lehmann and Stuart (2004) the overstatement is about 44% [2].

Customer lifetime value from a monthly churn rate

Advanced mode, with churn per month

CLV = (APV × F) ÷ (12 × C)
CLV
customer lifetime value, as above
APV
average purchase value
F
purchases per year
C
churn rate per month, as a decimal (5% is 0.05)

The expected lifetime is 1 ÷ C months: 5% a month is 20 months. The first month's purchases count.

Source: Based on the retention formula with the first period counted, at a zero discount rate: Gupta and colleagues (2006), note 6 [1], and Fader and Hardie (2012), cases 1 and 3 [3]. The lifetime of 1 ÷ churn is Gupta and colleagues' note 4, for a constant churn rate (exponentially distributed retention) [1].

Customer lifetime value from a yearly churn rate

Advanced mode, with churn per year

CLV = (APV × F) ÷ C
C
churn rate per year, as a decimal (20% is 0.20)

The expected lifetime is 1 ÷ C years: 20% a year is 5 years, the example in Gupta and colleagues' note 4.

Source: Based on the same retention formula as the monthly form [1][3].

Gross-margin CLV and the most to spend at 3:1

Advanced mode, with a gross margin

Gross-margin CLV = CLV × GM ÷ 100 Max CAC at 3:1 = Gross-margin CLV ÷ 3
CLV
customer lifetime value, from above
GM
gross margin: revenue less the cost of goods, as a percentage of revenue

Gross margin takes out the cost of goods only. The published CLV is on profit after the direct cost of serving the customer.

Source: CalcTrail's own measure and arithmetic; no publisher. The 3:1 ratio it applies is widely used; no primary source found (see the LTV:CAC ratio).

LTV:CAC ratio and CAC payback

Advanced mode, with a gross margin and a CAC

LTV:CAC = Gross-margin CLV ÷ CAC CAC payback = CAC ÷ (APV × F × GM ÷ 100 ÷ 12) months
CAC
customer acquisition cost
GM
gross margin, as a percentage

The ratio card is green at 3.0:1 or more, amber from 1.0:1 to below 3.0:1 and red below 1.0:1, read from the ratio as shown; these colors are CalcTrail's own. Payback is the months of gross profit a customer takes to earn back the CAC.

Source: Standard arithmetic; no single publisher. The 3:1 ratio is widely used; no primary source found (searched: the Interactive Advertising Bureau glossary, the Media Rating Council and Interactive Advertising Bureau guidelines, and the CLV papers cited here). No payback benchmark is used.

LTV:CAC ratio on revenue

Advanced mode, with a CAC and no gross margin

LTV:CAC = CLV ÷ CAC

On revenue the ratio is not graded against 3:1. Only a ratio below 1.0:1 is flagged, a loss at any margin.

Source: Standard arithmetic; no single publisher.

Sources

  1. Gupta S, Hanssens D, Hardie B, Kahn W, Kumar V, Lin N, Ravishanker N, Sriram S. Modeling Customer Lifetime Value, equation 1 and notes 4 and 6. Journal of Service Research, November 2006; 9(2): 139-155.
  2. Gupta S, Lehmann DR, Stuart JA. Valuing Customers, footnote 3 of the authors' February 2003 manuscript. Journal of Marketing Research, February 2004; 41(1): 7-18.
  3. Fader PS, Hardie BGS. Reconciling and Clarifying CLV Formulas, sections 1 and 2. Technical note, March 2012.

What this calculator does not cover

  • The headline CLV is lifetime revenue, not discounted. The research literature defines CLV as the present value of future profit less the acquisition cost, so for the same customer this figure is an upper bound.
  • Gross-margin CLV leaves out support and the cost of keeping a customer.
  • Churn is taken as constant over a customer's life, and every customer is the average one: cohorts are not modeled.
  • Acquisition cost is not subtracted from CLV. It appears only in the LTV:CAC ratio and the payback.

Sources checked on .

Help

Quick Start Guide

  1. Enter Average Purchase Value: Input the average amount a customer spends per purchase.
  2. Enter Purchase Frequency: Input how often customers make purchases, per week, month or year.
  3. Select Mode: Choose 'Simple' to enter customer lifespan directly, or 'Advanced' to calculate CLV from a churn rate.
  4. Enter Lifespan or Churn: Input average customer lifespan in Simple mode, or your churn rate per month or per year in Advanced mode.
  5. View CLV: See the lifetime revenue of one customer, not discounted.
  6. Add CAC for LTV:CAC Ratio: In Advanced mode, optionally enter your gross margin and CAC to see gross-margin CLV, the most you can spend to acquire a customer at 3:1, your LTV:CAC ratio and CAC payback.

Frequently Asked Questions

CLV (also called LTV) is the value of a customer over the whole relationship. In the research literature it is the present value of the profit the customer brings (Gupta and colleagues, 2006). This calculator's CLV is the lifetime revenue, not discounted; in Advanced mode, enter a gross margin to see the gross-margin CLV.

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